Unbeknownst to almost everyone, because the go-along, get-along establishment shut them out and played the double-standard game (while the media either ignored or ridiculed them), there was a proposal available which would make meaningful and immediate progress towards solving our debt and deficit problems. Commissioned by Freedom Works, it was the result of “a months-long crowd-sourced effort to develop a budget proposal that balances the budget, reduces the debt and gets America’s fiscal house back in order.”

The Freedom Works “Tea Party Budget” promises to reduce projected 2012 spending by $562 billion, making it the only credible plan available with the common sense to deal with bloated spending this year. Over 10 years, the plan cuts projected spending by $9.7 trillion.

After some study and reallocation between the Tea Party Budget’s spending categories and those found in the PJ Institute’s NERI model, I estimated that the current annual value of the ten-year savings achieved in the Tea Party budget would be $800 billion, broken down and slightly rounded as follows: Military – $170 billion, Medicare – $110 billion, Medicaid – $50 billion, Social Security – $20 billion, and Other – $450 billion. Plugging those reductions into the NERI model shows that the Tea Party Budget, while still not aggressive enough, actually would make decent progress:

The Tea Party Budget also projects $5.5 trillion in reduced tax collections compared to CBO projections, arising primarily from maintaining the current federal income tax rate structure (in current flawed parlance, this is usually referred to as making the “Bush tax cuts,” which really represent the tax system under which we’ve been living for the past eight years, permanent). On this score, the Tea Party budget is far too pessimistic. Past experience would indicate that most if not all of the projected reductions in collections wouldn’t really occur. Under the current rate structure, if Social Security tax rates go back to their original level, a genuinely recovering and ultimately prospering economy would generate far more in tax collections than the Tea Party Budget projects. The Bush economy generated over $2.6 trillion in gross collections in fiscal 2008 — over $400 billion more than during fiscal 2010. A robust post-Obama recovery could and should get us to $3 trillion in annual collections much more quickly than Freedom Works suggests. Then the biggest “problem” would be making sure that Washington’s revenue gusher doesn’t cause the spending spigots to come back on.

Unfortunately, as events this month have also confirmed, we’re mired in the muck of a political class with almost no will to address the certain train wreck which awaits if nothing is done. A German reporter’s assessment of Washington’s legislative inertia at a White House press conference a few days before Thanksgiving pretty much said it all: “[I]t’s not really a time where the U.S. is in a position to give advice to Europe.” No kidding. Come to think of it, most in the Beltway establishment have been dupers — most definitely not super — for way too many years.

Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog, BizzyBlog.com, since 2005, and has been a PJM contributor since 2008.

33 Comments, 19 Threads

In fiscal year 2011 the federal government spend 24.1% of GDP, a share not equaled since World War II​, while the feds collected only 15.4% of GDP.

Here are a few reasons why the fiscal situation is much worse than most people realize.

People are wildly underestimating the deficits America is going to run in this decade. Here is why.

1)The average rate of interest the Fed has had to pay to borrow for the last two decades has been 5.7%. However, President Obama is projecting the cost of money at only 2.5%.

A return to the normal Fed rate would, by 2020, add $4.9 trillion to the cumulative deficit.

2)Obama is estimating growth in 2012, 2013 and 2014 at 4%, 4.5% and 4.1%. But the normal rate for a mature economy recovering from recession is 2.5%.

Hence, if we return to a normal rate of growth, rather than rise to Obama’s projected rate, that would add $700 billion to the deficit over the next three years and $4 trillion by 2020.

Taken together, a U.S. return to a normal rate of growth of 2.5%, higher than today, and a normal rate of interest for the Fed could add as much as $9 trillion to the deficits between now and 2020.

3)The 5 biggest budget items are Defense-Military ($678 B), Social Security ($720 B), Medicare ($483 B), Medicaid ($275 B), and Interest on the Debt ($266 B)… Since it is politically impossible to cut any of these items, at best, this Congress will only slightly reduce the rate of speed at which we are heading toward a debt default.

4)America is headed for an entitlement crisis. Between 2010 and 2030, spending on Medicare and Social Security will explode. Medicare will rise from 3.6% of GDP to 5.2% of GDP. And Social Security will rise from 4.9% of GDP to 6.1% of GDP. Taken together combined Medicare and Social Security spending will rise in the next 20 years from 8.5% of GDP to 11.3% of GDP. And with the Baby Boomers retiring en mass over the next 18 years (2011-2029), at the rate of 10,000 a day, it will be impossible for any politician to do what is necessary in order to save us from going over the falls. Any talk of cutting entitlements and they will be quickly thrown out of office.

Is America then headed for an inevitable default?

Weimar Germany, Here We Come!

These are all symptoms though. These are not the problem. This … is not the problem. They are mere symptoms of the disease, the rot of our soul. The nations soul has been rotted out.

One doesn’t compare debt to income. Rather the proper comparisons are deficet to income, and debt to assets. An important subset of the latter is debt to liquid assets.

A key asset is the sovereign authority to tax. In theory, one could to sell off that, bit by bit and use the proceeds from the sale to retire part of the debt. For example, the US could sell off Saipan, Guam, and Hawaii, either to another country, or to the local residents.

Of course the people to whom these assets are sold would have a plan to recover the money they spent, using the authority to tax that they had purchased. The key question for the local people thus ‘sold’ is what would they do afterwards: Would they retire their debt? Would they retain their debt, and make payments on it? Would they make smaller payments use the collateral to borrow more?

There are also assets not related to the sovereign authority to tax. Consider roads and bridges built with federal money. They could be sold, with the proceeds used to retire debt. The purchaser could charge tolls, or could sell or rent land along the right of way for business uses. The sale of land along the right of way was used to fund the first transcontinental railroad.

Now consider national parks such as Yellowstone, Grand Canyon, Redwood Forest. Those could be sold to highest qualitied bidders in the normal way, and would be developed in accordance with the market, rather than in accordance with “experts”.

I’m losing you here. Our arrangement with Guam/CNMI (Saipan) is that they do not pay taxes (well, they do, but we give them back to the local government) and we get a lot of government territory. So what would you sell? We have no moral authority to sell a popualated territiory, or to charge for independence.

Do you mean to sell the army bases? My guess is we probably need them, and at any rate ,the locals will quite rightly insist that the money is theirs, at least a large part of it.

This just shows one how totally useless the fools in Washington are. Geeze, a bunch of apes would do a FAR better job. Congress is full of dangerous democrats & cowardly & foolish republicans. The prez could care less just so he gets re-elected & the bucks keep pouring in from the unions. In a few years, the mess Greece is in will actually look good to us. Head in the sand idiots! A pox on all of ‘em! Maybe we need to dissolve the republic & bring in some fascist to run everything. It has just about come to this point.

All democracies eventually collapse. In a democracy i.e. one-man, one-vote elections, you get exactly the government you deserve… Well how’s that working out? Real well, huh?

Karl Marx said “Democracy is the road to socialism.” And in the Manifesto Marx talks about “winning the battle of democracy.”

What we now have is the gridlock-deadlock of democracy… normally that would be a good thing — the federal government can’t get too much done, checks and balances etc. But this isn’t the America of the Eisenhower-JFK era where everything was running smoothly… No siree. America has run it’s course…and (it) is now headed for the abyss. The system worked for over 200 years…but it is now broken beyond repair.

We need a benevolent right-wing dictator to turn this nation around… It’ll never happen. Goodbye America. It was nice knowing you. Alea iacta est (The die has been cast).

We need a benevolent right-wing dictator to turn this nation around… It’ll never happen. Goodbye America. It was nice knowing you. Alea iacta est (The die has been cast).

No we need to educate the “masses” and swing the country back the other way. We need to strip all the the laws that have gutted our freedoms and rights so we can return this country to the one our for fathers gave us. The die is only cast if you alow it to cool.

No we do not need a dictator to turn this mess around. We need to abandon our Marxist economic programs and return to the government the Constitution dictates.
We are not a democracy and our Founders and writers of the Constitution were very careful to avoid the pitfalls of a democracy and built instead a representative republic. A form of government that is not open to the whims of mob rule that infects a democracy. Subsequent generations have been STUPID enough to let the Marxian worm eat away at the protections designed into the Constitution and we have become the Marxist nation Marx predicted a democracy would become.
We need to undo what previous generations including the doofusses running the country now, have done.
By the way – they were administrations long before Eisenhower/Kennedy that were responsible for the degradation and ruin of our representative republic.

True that. It will take total economic collapse ala Argentina 2001 and or Russia in the 1990′s to force American’s to man up and take responsibility for their lives and their country. Socialism ALWAYS ends in destitution and misery.

Bulgaricus – We already have a fascist government, ask GM bondholders or the taxpayers footing the bill for Wall Street bailouts, green energy crony kickbacks – Soylandra or the investors FLEECED by MF Global (Corzine was a BIG contributor to OBAMA’S campaign). Fascism is the government picking winners and losers with YOUR money.

“Once again, we have proof that the president and his administration, even as the country approaches a Grecian formula financial abyss, sees his reelection as far more important than America’s well-being.”

Tell me again why this isn’t treason? You have people who are led by a president who knowingly would prefer to see the country financially destroyed rather than do what’s right and cut the budget so that this nation can survive for future generations. To knowingly do this for the simple reason of trying to get re-elected (or saving your government job) is not only terrible, it is downright treasonous. The financial destruction of this nation is the goal countries like Iran, China, and Russia want for us. So why is it such a stretch to think that if there are certain Americans who knowingly and actively are working for the same results that Iran, China, and Russia want for us, those people should not be called treasonous? Anybody, ANYBODY, who knowingly wants to see the financial destruction of this nation is just as dangerous and just as guilty as any Soviet agent that was working in this country during the Cold War. And any people in Congress who actively support this cause, who actively place their jobs and financial security above the financial security of this nation, are no better than the people we fought during the Cold War. And we should start looking at it that way if we want real change in this country.

What should we do about it? Well, at the very least these people should not have JOBS in the Federal Government. So throwing them out in 2012 would be a good start. At most, these same people should be brought out into the spotlight and condemned for what they are, enemies of this nation and certainly no friends of our democratic republic. Shun them and force them to find some other line of work, if they can. That’s the least we can do as Americans.

“To knowingly do this for the simple reason of trying to get re-elected (or saving your government job) is not only terrible, it is downright treasonous. The financial destruction of this nation is the goal countries like Iran, China, and Russia want for us.”

I think the Obama Administration is doing precisely what it intends to do: eliminate the US as a singular World Power capable of acting unilaterally, and they’re pretty much there. The only thing really left to do to eliminate the US as a capitalistic republican democracy is to remove effective opposition. While I won’t go so far as to say that the opposition, Republican/Tea Party etc., has been effective, it does still have a legal existence and at least some power to interfere with the Soros Junta’s agenda. They’ll fix that part after the ’12 election.

The National Socialist Democratic Party is totally disinterested in anything but making this country completely dependent on the Government. We used to call that Fascism when in was Germany and Italy in the 1920s and ’30s. Some of the corporate capitalists will be left in place to provide slush funds for the politicos. We the people will be left with high inflation robbing us of any savings and investments we may have made. We have it today, it is just that most of us are unaware. For example, a 1965 Ford Mustang with a 289 V-8 and four speed transmission listed for $2495 on the dealer’s floor. Today that car, or as close as you can get to comparability, is north of $25,000. Keep that in mind if you are saving for retirement.

Unfortunately we are already past the point where the political decisions that need to be made, can be made by elected officials. There is no guarantee that a dictator will make the right choices, more likely a Peron (Petraeus?) type regime would continue down the statist path. General Pinochet rescued Chile, is there such a man on our horizon?
There is going to be massive stagflation and economic disruption, but we may come out OK at the end as we are forced to again make the things we need and buy only what we can afford.

Nope–we’re past the point where anybody, elected official or political commentator, is able to view anything other than pure political posturing. Almost all of our problems CAN be solved if only we had a little perspective. Equality? Is the fact that I bust my ass for income that is reported on W-2′s or 1099-MISC FAIR when rent seekers get their food stamps, medical care, housing subsidies and don’t get a 1099-GOV? 1099-GOV 1099-GOV 1099-GOV if you cant to KNOW where your money goes. Foreign policy? Shouldn’t we have more equality there, too. How about NO TAX MONEY, NO VISAS, NO AID of any kind to regimes that don’t annually espouse support for our First Amendment. Are we really wanting to spread freedom or NOT? GE GE GE bringing good things to tyrannies. Education? In todays world can’t we subsidize a single student and capture all their classes and assignments for a Kindle book? Knowledge should be free. Government aid to the arts? When I used to code for a client as a contractor the person paying for the computer art owned the copyright. All NEA, PBS, CPB projects that use government money ARE owned by the people and we should freely steal it. Start with Moyers and Ken Burns work because empires have been built with your tax money. Simple, eh?

I’m 64 and I can not remember a time in my adult life when government projections ever came close to the eventual reality. Its all smoke and mirrors. Obama and 95% of the political class general have absolutely zero understanding of what is happening in the real world. The economy is built on the premise that easy credit and the exponential growth of debt are sustainable. This is true in the private sector and the public sector. We’ve been on a binge, borrowing from tomorrow to pay for yesterday. This always leads to bankruptcy. We are now entering the too big to save phase of the global economy’s addiction to debt.

Come on it’s the $40.00 stupid. The president and congress are too busy right now arguing and throwing rotten eggs at each other over a payroll tax cut that will save a famly with a $50,000 annual income $40 in 2012. Indeed this morning we are told that Obama is about to launch his $40 campaign bringing families forward to explain how $40 will be life changing and more or less put food on the table of their starving family or whatever.

Meanwhile the 479 Departments and Agencies of the Federal Government waste hundreds of billions of dollars in redundancy, inefficiency, incompetence and now under Obama have begun to legislate laws by unelected bureaucrats with political agendas as the congress looks the other way abidicating their responsibilites so that their image will not be tarnished as the election cycle draws near.

The Fed, with no oversight or help brom our legislative or administrative branches (cowards that they all are) meanwhile manipulates the currency/finances of America and struggles to keep we and they and them an others afloat. Congress won’t do it so they must even if often hamfisted (still I wouldn’t want their job, distasteful as they sometimes are).

Congress, the administration and the supremes are seemingly less and less interested in preserving the constitution and more and more and more interested in their stature and/or re-election and generally deaf to the needs and concerns of their citizen bosses.

Meanwhile the bosses so far don’t seem too much interested in changing anything (yes they poked their head out a bit in 2010, will they again?), but they ought to listen up. This is not just another tussle between the left and right that will go away. We are at the tipping point if not passed it. Maybe not next week, but soon enough even if it’s 20 years away, but it is now visible on the horizon

A collapse may be the only outcome/solution that will begin to resovle all the issues and I suspect it will not be pretty, maybe even totalitarian (someone always jumps into the void it would seem). Yes Matilda, it can happen here and $40 won’t solve it no matter what they tell you.

Sadly and tragically… and apparently not.
But the jury is still out… but just barely.

Just as too many stop signs at too many road crossings have been paid for with someone’s life, America will have to get much closer to our financial abyss for enough people to bring enough heat into the kitchen that is our Congress and our White House. Unfortunately, that could way too easily happen past the point of no return and be a little too late. And the huge stop sign that we will have errected will be for naught and will have to be paid for in real blood.

The other danger is that enough people will start feeling enough discomfort and start pleading for anyone, anyone… yes, even as witnessed in some posts here… even for some dictator to “please make the trains run on time again.” That, friends, is straight from the Saul Alinsky playbook – bring the country to a point where even the most vile dictator will seem like a savior.

Our only chance is that enough of us will “pass the word” to enough of our friends, family and associates before November, 2012. Let them know about PJ Media and other conservative sites. Forward them articles and commentaries. Engage them in polite conversation on places like Facebook, at the water cooler and across the kitchen table. And best of all, get involved in the process and then bring some like-minded friends to the polling place.

For the sake of all our futures, Obama and his 20% destructive leftist minority must be exposed… and defeated.

Educate the Brain Dead? How? You must first revive their brain! How? Fortunately, many if not most of those voted for Hope & Change were just fooled. The need to do the impossible is unnecessary, we must just keep them away from the machinery.

The chart assumes deficit spending can be sustained. That is a more than doubtful proposition as the Euro zone has learned. Not even economic growth can rescue us now as the OWS parasite class presses its insatiable demands. Since we are a people incapable of the political will or sacrifice necessary to address the situation now, here is the trajectory we face: credit crisis, hyperinflation, economic paralysis. Count on Obama to start a war in his second administration as cover for ever more strict domestic regimentation. And say good bye to the USA we once loved. Flee while you can.

Sadly, as deficit spending accelerates, popular understanding of economics becomes more delusional. Apparently no one believes in saving or paying interest to savers. With endless borrowing, the Fed now controls private capital formation just as it controls and finances the mortgage industry.Socialism? We’re way past. The most radical 19th century socialist never dreamed of this.This year, true US government borrowing is about one-third of all borrowing,public and private, on the planet.And now we cut social security funding in half.When Obama says it’s payed for, he means the next generation will pay for it.Spending on pyramids sure creates jobs.Let!s build more.

The liberals, and Obama especially, truly believe that all they have to do is print up more money to solve the nation’s problem. They have never been taught any free market economics, and really don’t have a clue about fiscal or monetary policy. They think that all you have to do is spend more money, no matter what method you use to get it, tax or print. It is more an utter failure of our education system than anything else, or more accurately the takeover of our education system by liberals, socialists and marxists.

What kind of man was Ludwig von Mises? As this unique film shows, Mises (1881-1973) was a man who never stopped fighting for freedom: not when the Nazis burned his books, not when the Left blackballed him at universities, not when it seemed as if statism had won. With courage and genius, he fought big government until the day he died … in 25 books, hundreds of articles, and more than 60 years of teaching.

Mises’s battles against Communists, Nazis, and other socialists, are featured in this film, as are his ideas of Liberty. There is also the old Vienna he loved, the Bolshevik prime minister he dissuaded from Communism, and a cast of villains from Lenin to Hitler, as well as such supporters and students as Murray Rothbard, Ron Paul, Bettina Greaves, M. Stanton Evans, Mary Peterson, Joseph Sobran, and Yuri Maltsev.

Among his many accomplishments, Mises showed that socialism had to fail, that central banking causes recessions and depressions, that the gold standard is honest money, and that only laissez-faire capitalism is fully compatible with Western civilization. Mises was the twentieth century’s foremost economist, and one of its most important champions of Liberty. Here is a film that does justice to this extraordinary man, and to his equally extraordinary ideas.http://www.youtube.com/watch?v=EpATNp5DjYI

As a simple person I have a simple understanding of economics. As a child I knew I could not spend more than my Paper Route brought in. None of the business owners I knew could spend more cash or borrow more cash than their business produced in revenues without going out of business. If the same simple equation works in business surely the same applies to Governments.
I also noticed neither Capitalism nor Socialism were evil but it was individual humans who controlled the money or means to production who were the evil ones.

Why do you keep mentioning Weimar? Those people had to deal with the aftermath of the Great War and the reparations. They were half-way honest men. A more apt comparison is Zimbabwe—in just about every respect. The USA, like Haiti, is become an outpost of Africa.